G.R. No.

June 29, 2010

GREGORIO V. TONGKO, Petitioner,

This resolves the Motion for Reconsideration1 dated December 3, 2008 filed by respondent TheManufacturers Life Insurance Co. (Phils.), Inc. (Manulife) to set aside our Decision of November7, 2008. In the assailed decision, we found that an employer-employee relationship existedbetween Manulife and petitioner Gregorio Tongko and ordered Manulife to pay Tongkobackwages and separation pay for illegal dismissal.The following facts have been stated in our Decision of November 7, 2008, now underreconsideration, but are repeated, simply for purposes of clarity.The contractual relationship between Tongko and Manulife had two basic phases. The first orinitial phase began on July 1, 1977, under a Career Agents Agreement (Agreement) thatprovided:It is understood and agreed that the Agent is an independent contractor and nothing containedherein shall be construed or interpreted as creating an employer-employee relationship betweenthe Company and the Agent.xxxxa) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies andother products offered by the Company, and collect, in exchange for provisional receipts issuedby the Agent, money due to or become due to the Company in respect of applications or policiesobtained by or through the Agent or from policyholders allotted by the Company to the Agent forservicing, subject to subsequent confirmation of receipt of payment by the Company asevidenced by an Official Receipt issued by the Company directly to the policyholder.xxxxThe Company may terminate this Agreement for any breach or violation of any of the provisionshereof by the Agent by giving written notice to the Agent within fifteen (15) days from the timeof the discovery of the breach. No waiver, extinguishment, abandonment, withdrawal orcancellation of the right to terminate this Agreement by the Company shall be construed for anyprevious failure to exercise its right under any provision of this Agreement.Either of the parties hereto may likewise terminate his Agreement at any time without cause, bygiving to the other party fifteen (15) days notice in writing.2

Tongko additionally agreed (1) to comply with all regulations and requirements of Manulife, and(2) to maintain a standard of knowledge and competency in the sale of Manulifes products,satisfactory to Manulife and sufficient to meet the volume of the new business, required by hisProduction Club membership.3The second phase started in 1983 when Tongko was named Unit Manager in Manulifes SalesAgency Organization. In 1990, he became a Branch Manager. Six years later (or in 1996),Tongko became a Regional Sales Manager.4Tongkos gross earnings consisted of commissions, persistency income, and managementoverrides. Since the beginning, Tongko consistently declared himself self-employed in hisincome tax returns. Thus, under oath, he declared his gross business income and deducted hisbusiness expenses to arrive at his taxable business income. Manulife withheld the corresponding10% tax on Tongkos earnings.5In 2001, Manulife instituted manpower development programs at the regional sales managementlevel. Respondent Renato Vergel de Dios wrote Tongko a letter dated November 6, 2001 onconcerns that were brought up during the October 18, 2001 Metro North Sales ManagersMeeting. De Dios wrote:The first step to transforming Manulife into a big league player has been very clear to increasethe number of agents to at least 1,000 strong for a start. This may seem diametrically opposed tothe way Manulife was run when you first joined the organization. Since then, however,substantial changes have taken place in the organization, as these have been influenced bydevelopments both from within and without the company.xxxxThe issues around agent recruiting are central to the intended objectives hence the need for aSenior Managers meeting earlier last month when Kevin OConnor, SVP-Agency, took to thefloor to determine from our senior agency leaders what more could be done to bolster manpowerdevelopment. At earlier meetings, Kevin had presented information where evidently, yourRegion was the lowest performer (on a per Manager basis) in terms of recruiting in 2000 and, asof today, continues to remain one of the laggards in this area.While discussions, in general, were positive other than for certain comments from your endwhich were perceived to be uncalled for, it became clear that a one-on-one meeting with you wasnecessary to ensure that you and management, were on the same plane. As gleaned from some ofyour previous comments in prior meetings (both in group and one-on-one), it was not clear thatwe were proceeding in the same direction.Kevin held subsequent series of meetings with you as a result, one of which I joined briefly. Inthose subsequent meetings you reiterated certain views, the validity of which we challenged andsubsequently found as having no basis.

With such views coming from you, I was a bit concerned that the rest of the Metro NorthManagers may be a bit confused as to the directions the company was taking. For this reason, Isought a meeting with everyone in your management team, including you, to clear the air, so tospeak.This note is intended to confirm the items that were discussed at the said Metro North RegionsSales Managers meeting held at the 7/F Conference room last 18 October.xxxxIssue # 2: "Some Managers are unhappy with their earnings and would want to revert to theposition of agents."This is an often repeated issue you have raised with me and with Kevin. For this reason, I placedthe issue on the table before the rest of your Regions Sales Managers to verify its validity. Asyou must have noted, no Sales Manager came forward on their own to confirm your statementand it took you to name Malou Samson as a source of the same, an allegation that Malou herselfdenied at our meeting and in your very presence.This only confirms, Greg, that those prior comments have no solid basis at all. I now believewhat I had thought all along, that these allegations were simply meant to muddle the issuessurrounding the inability of your Region to meet its agency development objectives!Issue # 3: "Sales Managers are doing what the company asks them to do but, in the process, theyearn less."xxxxAll the above notwithstanding, we had your own records checked and we found that you made alot more money in the Year 2000 versus 1999. In addition, you also volunteered the informationto Kevin when you said that you probably will make more money in the Year 2001 compared toYear 2000. Obviously, your above statement about making "less money" did not refer to you butthe way you argued this point had us almost believing that you were spouting the gospel of truthwhen you were not. x x xxxxxAll of a sudden, Greg, I have become much more worried about your ability to lead this grouptowards the new direction that we have been discussing these past few weeks, i.e., Manulifesgoal to become a major agency-led distribution company in the Philippines. While as you claim,you have not stopped anyone from recruiting, I have never heard you proactively push for greateragency recruiting. You have not been proactive all these years when it comes to agency growth.xxxx

I cannot afford to see a major region fail to deliver on its developmental goals next year and so,we are making the following changes in the interim:1. You will hire at your expense a competent assistant who can unload you of much of the routinetasks which can be easily delegated. This assistant should be so chosen as to complement yourskills and help you in the areas where you feel "may not be your cup of tea."You have stated, if not implied, that your work as Regional Manager may be too taxing for youand for your health. The above could solve this problem.xxxx2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the NorthStar Branch (NSB) in autonomous fashion. x x xI have decided to make this change so as to reduce your span of control and allow you toconcentrate more fully on overseeing the remaining groups under Metro North, your Central Unitand the rest of the Sales Managers in Metro North. I will hold you solely responsible for meetingthe objectives of these remaining groups.xxxxThe above changes can end at this point and they need not go any further. This, however, isentirely dependent upon you. But you have to understand that meeting corporate objectives byeveryone is primary and will not be compromised. We are meeting tough challenges next year,and I would want everybody on board. Any resistance or holding back by anyone will be dealtwith accordingly.6Subsequently, de Dios wrote Tongko another letter, dated December 18, 2001, terminatingTongkos services:It would appear, however, that despite the series of meetings and communications, both one-onone meetings between yourself and SVP Kevin OConnor, some of them with me, as well asgroup meetings with your Sales Managers, all these efforts have failed in helping you align yourdirections with Managements avowed agency growth policy.xxxxOn account thereof, Management is exercising its prerogative under Section 14 of your AgentsContract as we are now issuing this notice of termination of your Agency Agreement with useffective fifteen days from the date of this letter.7Tongko responded by filing an illegal dismissal complaint with the National Labor RelationsCommission (NLRC) Arbitration Branch. He essentially alleged despite the clear terms of theletter terminating his Agency Agreement that he was Manulifes employee before he wasillegally dismissed.8

Thus, the threshold issue is the existence of an employment relationship. A finding that noneexists renders the question of illegal dismissal moot; a finding that an employment relationshipexists, on the other hand, necessarily leads to the need to determine the validity of thetermination of the relationship.A. Tongkos Case for Employment RelationshipTongko asserted that as Unit Manager, he was paid an annual over-rider not exceedingP50,000.00, regardless of production levels attained and exclusive of commissions and bonuses.He also claimed that as Regional Sales Manager, he was given a travel and entertainmentallowance of P36,000.00 per year in addition to his overriding commissions; he was tasked withnumerous administrative functions and supervisory authority over Manulifes employees, asidefrom merely selling policies and recruiting agents for Manulife; and he recommended andrecruited insurance agents subject to vetting and approval by Manulife. He further alleges that hewas assigned a definite place in the Manulife offices when he was not in the field at the 3rdFloor, Manulife Center, 108 Tordesillas corner Gallardo Sts., Salcedo Village, Makati City forwhich he never paid any rental. Manulife provided the office equipment he used, includingtables, chairs, computers and printers (and even office stationery), and paid for the electricity,water and telephone bills. As Regional Sales Manager, Tongko additionally asserts that he wasrequired to follow at least three codes of conduct.9B. Manulifes Case Agency Relationship with TongkoManulife argues that Tongko had no fixed wage or salary. Under the Agreement, Tongko waspaid commissions of varying amounts, computed based on the premium paid in full and actuallyreceived by Manulife on policies obtained through an agent. As sales manager, Tongko was paidoverriding sales commission derived from sales made by agents under hisunit/structure/branch/region. Manulife also points out that it deducted and withheld a 10% taxfrom all commissions Tongko received; Tongko even declared himself to be self-employed andconsistently paid taxes as suchi.e., he availed of tax deductions such as ordinary and necessarytrade, business and professional expenses to which a business is entitled.Manulife asserts that the labor tribunals have no jurisdiction over Tongkos claim as he was notits employee as characterized in the four-fold test and our ruling in Carungcong v. NationalLabor Relations Commission.10The Conflicting Rulings of the Lower TribunalsThe labor arbiter decreed that no employer-employee relationship existed between the parties.However, the NLRC reversed the labor arbiters decision on appeal; it found the existence of anemployer-employee relationship and concluded that Tongko had been illegally dismissed. In thepetition for certiorari with the Court of Appeals (CA), the appellate court found that the NLRCgravely abused its discretion in its ruling and reverted to the labor arbiters decision that noemployer-employee relationship existed between Tongko and Manulife.

Our Decision of November 7, 2008

In our Decision of November 7, 2008, we reversed the CA ruling and found that an employmentrelationship existed between Tongko and Manulife. We concluded that Tongko is Manulifesemployee for the following reasons:1. Our ruling in the first Insular11 case did not foreclose the possibility of an insurance agentbecoming an employee of an insurance company; if evidence exists showing that the companypromulgated rules or regulations that effectively controlled or restricted an insurance agentschoice of methods or the methods themselves in selling insurance, an employer-employeerelationship would be present. The determination of the existence of an employer-employeerelationship is thus on a case-to-case basis depending on the evidence on record.2. Manulife had the power of control over Tongko, sufficient to characterize him as an employee,as shown by the following indicators:2.1 Tongko undertook to comply with Manulifes rules, regulations and other requirements, i.e.,the different codes of conduct such as the Agent Code of Conduct, the Manulife Financial Codeof Conduct, and the Financial Code of Conduct Agreement;2.2 The various affidavits of Manulifes insurance agents and managers, who occupied similarpositions as Tongko, showed that they performed administrative duties that establishedemployment with Manulife;12 and2.3 Tongko was tasked to recruit some agents in addition to his other administrative functions.De Dios letter harped on the direction Manulife intended to take, viz., greater agencyrecruitment as the primary means to sell more policies; Tongkos alleged failure to follow thisdirective led to the termination of his employment with Manulife.The Motion for ReconsiderationManulife disagreed with our Decision and filed the present motion for reconsideration on thefollowing GROUNDS:1. The November 7[, 2008] Decision violates Manulifes right to due process by: (a) confiningthe review only to the issue of "control" and utterly disregarding all the other issues that had beenjoined in this case; (b) mischaracterizing the divergence of conclusions between the CA and theNLRC decisions as confined only to that on "control"; (c) grossly failing to consider the findingsand conclusions of the CA on the majority of the material evidence, especially [Tongkos]declaration in his income tax returns that he was a "business person" or "self-employed"; and (d)allowing [Tongko] to repudiate his sworn statement in a public document.2. The November 7[, 2008] Decision contravenes settled rules in contract law and agency,distorts not only the legal relationships of agencies to sell but also distributorship andfranchising, and ignores the constitutional and policy context of contract law vis--vis labor law.

3. The November 7[, 2008] Decision ignores the findings of the CA on the three elements of thefour-fold test other than the "control" test, reverses well-settled doctrines of law on employeremployee relationships, and grossly misapplies the "control test," by selecting, without basis, afew items of evidence to the exclusion of more material evidence to support its conclusion thatthere is "control."4. The November 7[, 2008] Decision is judicial legislation, beyond the scope authorized byArticles 8 and 9 of the Civil Code, beyond the powers granted to this Court under Article VIII,Section 1 of the Constitution and contravenes through judicial legislation, the constitutionalprohibition against impairment of contracts under Article III, Section 10 of the Constitution.5. For all the above reasons, the November 7[, 2008] Decision made unsustainable and reversibleerrors, which should be corrected, in concluding that Respondent Manulife and Petitioner had anemployer-employee relationship, that Respondent Manulife illegally dismissed Petitioner, andfor consequently ordering Respondent Manulife to pay Petitioner backwages, separation pay,nominal damages and attorneys fees.13THE COURTS RULINGA. The Insurance and the Civil Codes;the Parties Intent and EstablishedIndustry PracticesWe cannot consider the present case purely from a labor law perspective, oblivious that thefactual antecedents were set in the insurance industry so that the Insurance Code primarilygoverns. Chapter IV, Title 1 of this Code is wholly devoted to "Insurance Agents and Brokers"and specifically defines the agents and brokers relationship with the insurance company and howthey are governed by the Code and regulated by the Insurance Commission.The Insurance Code, of course, does not wholly regulate the "agency" that it speaks of, as agencyis a civil law matter governed by the Civil Code. Thus, at the very least, three sets of laws namely, the Insurance Code, the Labor Code and the Civil Code have to be considered inlooking at the present case. Not to be forgotten, too, is the Agreement (partly reproduced on page2 of this Dissent and which no one disputes) that the parties adopted to govern their relationshipfor purposes of selling the insurance the company offers. To forget these other laws is to take amyopic view of the present case and to add to the uncertainties that now exist in considering thelegal relationship between the insurance company and its "agents."The main issue of whether an agency or an employment relationship exists depends on theincidents of the relationship. The Labor Code concept of "control" has to be compared anddistinguished with the "control" that must necessarily exist in a principal-agent relationship. Theprincipal cannot but also have his or her say in directing the course of the principal-agentrelationship, especially in cases where the company-representative relationship in the insuranceindustry is an agency.a. The laws on insurance and agency

The business of insurance is a highly regulated commercial activity in the country, in termsparticularly of who can be in the insurance business, who can act for and in behalf of an insurer,and how these parties shall conduct themselves in the insurance business. Section 186 of theInsurance Code provides that "No person, partnership, or association of persons shall transactany insurance business in the Philippines except as agent of a person or corporation authorized todo the business of insurance in the Philippines." Sections 299 and 300 of the Insurance Code onInsurance Agents and Brokers, among other provisions, provide:Section 299. No insurance company doing business in the Philippines, nor any agent thereof,shall pay any commission or other compensation to any person for services in obtaininginsurance, unless such person shall have first procured from the Commissioner a license to act asan insurance agent of such company or as an insurance broker as hereinafter provided.No person shall act as an insurance agent or as an insurance broker in the solicitation orprocurement of applications for insurance, or receive for services in obtaining insurance, anycommission or other compensation from any insurance company doing business in thePhilippines or any agent thereof, without first procuring a license so to act from theCommissioner x x x The Commissioner shall satisfy himself as to the competence andtrustworthiness of the applicant and shall have the right to refuse to issue or renew and tosuspend or revoke any such license in his discretion.1avvphi1.netSection 300. Any person who for compensation solicits or obtains insurance on behalf of anyinsurance company or transmits for a person other than himself an application for a policy orcontract of insurance to or from such company or offers or assumes to act in the negotiating ofsuch insurance shall be an insurance agent within the intent of this section and shall therebybecome liable to all the duties, requirements, liabilities and penalties to which an insurance agentis subject.The application for an insurance agents license requires a written examination, and the applicantmust be of good moral character and must not have been convicted of a crime involving moralturpitude.14 The insurance agent who collects premiums from an insured person for remittanceto the insurance company does so in a fiduciary capacity, and an insurance company whichdelivers an insurance policy or contract to an authorized agent is deemed to have authorized theagent to receive payment on the companys behalf.15 Section 361 further prohibits the offer,negotiation, or collection of any amount other than that specified in the policy and this coversany rebate from the premium or any special favor or advantage in the dividends or benefitaccruing from the policy.Thus, under the Insurance Code, the agent must, as a matter of qualification, be licensed andmust also act within the parameters of the authority granted under the license and under thecontract with the principal. Other than the need for a license, the agent is limited in the way heoffers and negotiates for the sale of the companys insurance products, in his collection activities,and in the delivery of the insurance contract or policy. Rules regarding the desired results (e.g.,the required volume to continue to qualify as a company agent, rules to check on the parameterson the authority given to the agent, and rules to ensure that industry, legal and ethical rules are

followed) are built-in elements of control specific to an insurance agency and should not andcannot be read as elements of control that attend an employment relationship governed by theLabor Code.On the other hand, the Civil Code defines an agent as a "person [who] binds himself to rendersome service or to do something in representation or on behalf of another, with the consent orauthority of the latter."16 While this is a very broad definition that on its face may evenencompass an employment relationship, the distinctions between agency and employment aresufficiently established by law and jurisprudence.Generally, the determinative element is the control exercised over the one rendering service. Theemployer controls the employee both in the results and in the means and manner of achievingthis result. The principal in an agency relationship, on the other hand, also has the prerogative toexercise control over the agent in undertaking the assigned task based on the parameters outlinedin the pertinent laws.Under the general law on agency as applied to insurance, an agency must be express in light ofthe need for a license and for the designation by the insurance company. In the present case, theAgreement fully serves as grant of authority to Tongko as Manulifes insurance agent.17 Thisagreement is supplemented by the companys agency practices and usages, duly accepted by theagent in carrying out the agency.18 By authority of the Insurance Code, an insurance agency isfor compensation,19 a matter the Civil Code Rules on Agency presumes in the absence of proofto the contrary.20 Other than the compensation, the principal is bound to advance to, or toreimburse, the agent the agreed sums necessary for the execution of the agency.21 Byimplication at least under Article 1994 of the Civil Code, the principal can appoint two or moreagents to carry out the same assigned tasks,22 based necessarily on the specific instructions anddirectives given to them.With particular relevance to the present case is the provision that "In the execution of the agency,the agent shall act in accordance with the instructions of the principal."23 This provision ispertinent for purposes of the necessary control that the principal exercises over the agent inundertaking the assigned task, and is an area where the instructions can intrude into the labor lawconcept of control so that minute consideration of the facts is necessary. A related article isArticle 1891 of the Civil Code which binds the agent to render an account of his transactions tothe principal.B. The Cited CaseThe Decision of November 7, 2008 refers to the first Insular and Grepalife cases to establish thatthe company rules and regulations that an agent has to comply with are indicative of anemployer-employee relationship.24 The Dissenting Opinions of Justice Presbitero Velasco, Jr.and Justice Conchita Carpio Morales also cite Insular Life Assurance Co. v. National LaborRelations Commission (second Insular case)25 to support the view that Tongko is Manulifesemployee. On the other hand, Manulife cites the Carungcong case and AFP Mutual BenefitAssociation, Inc. v. National Labor Relations Commission (AFPMBAI case)26 to support itsallegation that Tongko was not its employee.

A caveat has been given above with respect to the use of the rulings in the cited cases becausenone of them is on all fours with the present case; the uniqueness of the factual situation of thepresent case prevents it from being directly and readily cast in the mold of the cited cases. Thesecited cases are themselves different from one another; this difference underscores the need toread and quote them in the context of their own factual situations.The present case at first glance appears aligned with the facts in the Carungcong, the Grepalife,and the second Insular Life cases. A critical difference, however, exists as these cited cases dealtwith the proper legal characterization of a subsequent management contract that superseded theoriginal agency contract between the insurance company and its agent. Carungcong dealt with asubsequent Agreement making Carungcong a New Business Manager that clearly superseded theAgreement designating Carungcong as an agent empowered to solicit applications for insurance.The Grepalife case, on the other hand, dealt with the proper legal characterization of theappointment of the Ruiz brothers to positions higher than their original position as insuranceagents. Thus, after analyzing the duties and functions of the Ruiz brothers, as these wereenumerated in their contracts, we concluded that the company practically dictated the manner bywhich the Ruiz brothers were to carry out their jobs. Finally, the second Insular Life case dealtwith the implications of de los Reyes appointment as acting unit manager which, like thesubsequent contracts in the Carungcong and the Grepalife cases, was clearly defined under asubsequent contract. In all these cited cases, a determination of the presence of the Labor Codeelement of control was made on the basis of the stipulations of the subsequent contracts.In stark contrast with the Carungcong, the Grepalife, and the second Insular Life cases, the onlycontract or document extant and submitted as evidence in the present case is the Agreement apure agency agreement in the Civil Code context similar to the original contract in the firstInsular Life case and the contract in the AFPMBAI case. And while Tongko was later ondesignated unit manager in 1983, Branch Manager in 1990, and Regional Sales Manager in1996, no formal contract regarding these undertakings appears in the records of the case. Anysuch contract or agreement, had there been any, could have at the very least provided the basesfor properly ascertaining the juridical relationship established between the parties.These critical differences, particularly between the present case and the Grepalife and the secondInsular Life cases, should therefore immediately drive us to be more prudent and cautious inapplying the rulings in these cases.C. Analysis of the Evidencec.1. The AgreementThe primary evidence in the present case is the July 1, 1977 Agreement that governed anddefined the parties relations until the Agreements termination in 2001. This Agreement stoodfor more than two decades and, based on the records of the case, was never modified or novated.It assumes primacy because it directly dealt with the nature of the parties relationship up to thevery end; moreover, both parties never disputed its authenticity or the accuracy of its terms.

By the Agreements express terms, Tongko served as an "insurance agent" for Manulife, not asan employee. To be sure, the Agreements legal characterization of the nature of the relationshipcannot be conclusive and binding on the courts; as the dissent clearly stated, the characterizationof the juridical relationship the Agreement embodied is a matter of law that is for the courts todetermine. At the same time, though, the characterization the parties gave to their relationship inthe Agreement cannot simply be brushed aside because it embodies their intent at the time theyentered the Agreement, and they were governed by this understanding throughout theirrelationship. At the very least, the provision on the absence of employer-employee relationshipbetween the parties can be an aid in considering the Agreement and its implementation, and inappreciating the other evidence on record.The parties legal characterization of their intent, although not conclusive, is critical in this casebecause this intent is not illegal or outside the contemplation of law, particularly of the Insuranceand the Civil Codes. From this perspective, the provisions of the Insurance Code cannot bedisregarded as this Code (as heretofore already noted) expressly envisions a principal-agentrelationship between the insurance company and the insurance agent in the sale of insurance tothe public.1awph!1 For this reason, we can take judicial notice that as a matter of InsuranceCode-based business practice, an agency relationship prevails in the insurance industry for thepurpose of selling insurance. The Agreement, by its express terms, is in accordance with theInsurance Code model when it provided for a principal-agent relationship, and thus cannotlightly be set aside nor simply be considered as an agreement that does not reflect the partiestrue intent. This intent, incidentally, is reinforced by the system of compensation the Agreementprovides, which likewise is in accordance with the production-based sales commissions theInsurance Code provides.Significantly, evidence shows that Tongkos role as an insurance agent never changed during hisrelationship with Manulife. If changes occurred at all, the changes did not appear to be in thenature of their core relationship. Tongko essentially remained an agent, but moved up in this rolethrough Manulifes recognition that he could use other agents approved by Manulife, butoperating under his guidance and in whose commissions he had a share. For want of a betterterm, Tongko perhaps could be labeled as a "lead agent" who guided under his wing otherManulife agents similarly tasked with the selling of Manulife insurance.Like Tongko, the evidence suggests that these other agents operated under their own agencyagreements. Thus, if Tongkos compensation scheme changed at all during his relationship withManulife, the change was solely for purposes of crediting him with his share in the commissionsthe agents under his wing generated. As an agent who was recruiting and guiding other insuranceagents, Tongko likewise moved up in terms of the reimbursement of expenses he incurred in thecourse of his lead agency, a prerogative he enjoyed pursuant to Article 1912 of the Civil Code.Thus, Tongko received greater reimbursements for his expenses and was even allowed to useManulife facilities in his interactions with the agents, all of whom were, in the strict sense,Manulife agents approved and certified as such by Manulife with the Insurance Commission.That Tongko assumed a leadership role but nevertheless wholly remained an agent is theinevitable conclusion that results from the reading of the Agreement (the only agreement onrecord in this case) and his continuing role thereunder as sales agent, from the perspective of the

Insurance and the Civil Codes and in light of what Tongko himself attested to as his role asRegional Sales Manager. To be sure, this interpretation could have been contradicted if otheragreements had been submitted as evidence of the relationship between Manulife and Tongko onthe latters expanded undertakings. In the absence of any such evidence, however, this reading based on the available evidence and the applicable insurance and civil law provisions muststand, subject only to objective and evidentiary Labor Code tests on the existence of anemployer-employee relationship.In applying such Labor Code tests, however, the enforcement of the Agreement during the courseof the parties relationship should be noted. From 1977 until the termination of the Agreement,Tongkos occupation was to sell Manulifes insurance policies and products. Both partiesacquiesced with the terms and conditions of the Agreement. Tongko, for his part, accepted all thebenefits flowing from the Agreement, particularly the generous commissions.Evidence indicates that Tongko consistently clung to the view that he was an independent agentselling Manulife insurance products since he invariably declared himself a business or selfemployed person in his income tax returns. This consistency with, and action made pursuant tothe Agreement were pieces of evidence that were never mentioned nor considered in ourDecision of November 7, 2008. Had they been considered, they could, at the very least, serve asTongkos admissions against his interest. Strictly speaking, Tongkos tax returns cannot but belegally significant because he certified under oath the amount he earned as gross businessincome, claimed business deductions, leading to his net taxable income. This should be evidenceof the first order that cannot be brushed aside by a mere denial. Even on a laymans view that isdevoid of legal considerations, the extent of his annual income alone renders his claimedemployment status doubtful.27Hand in hand with the concept of admission against interest in considering the tax returns, theconcept of estoppel a legal and equitable concept28 necessarily must come into play.Tongkos previous admissions in several years of tax returns as an independent agent, as againsthis belated claim that he was all along an employee, are too diametrically opposed to be simplydismissed or ignored. Interestingly, Justice Velascos dissenting opinion states that Tongko wasforced to declare himself a business or self-employed person by Manulifes persistent refusal torecognize him as its employee.29 Regrettably, the dissent has shown no basis for this conclusion,an understandable omission since no evidence in fact exists on this point in the records of thecase. In fact, what the evidence shows is Tongkos full conformity with, and action as, anindependent agent until his relationship with Manulife took a bad turn.Another interesting point the dissent raised with respect to the Agreement is its conclusion thatthe Agreement negated any employment relationship between Tongko and Manulife so that thecommissions he earned as a sales agent should not be considered in the determination of thebackwages and separation pay that should be given to him. This part of the dissent is correctalthough it went on to twist this conclusion by asserting that Tongko had dual roles in hisrelationship with Manulife; he was an agent, not an employee, in so far as he sold insurance forManulife, but was an employee in his capacity as a manager. Thus, the dissent concluded thatTongkos backwages should only be with respect to his role as Manulifes manager.

The conclusion with respect to Tongkos employment as a manager is, of course, unacceptablefor the legal, factual and practical reasons discussed in this Resolution. In brief, the factualreason is grounded on the lack of evidentiary support of the conclusion that Manulife exercisedcontrol over Tongko in the sense understood in the Labor Code. The legal reason, partly based onthe lack of factual basis, is the erroneous legal conclusion that Manulife controlled Tongko andwas thus its employee. The practical reason, on the other hand, is the havoc that the dissentsunwarranted conclusion would cause the insurance industry that, by the laws own design,operated along the lines of principal-agent relationship in the sale of insurance.c.2. Other Evidence of Alleged ControlA glaring evidentiary gap for Tongko in this case is the lack of evidence on record showing thatManulife ever exercised means-and-manner control, even to a limited extent, over Tongko duringhis ascent in Manulifes sales ladder. In 1983, Tongko was appointed unit manager. Inexplicably,Tongko never bothered to present any evidence at all on what this designation meant. This alsoholds true for Tongkos appointment as branch manager in 1990, and as Regional Sales Managerin 1996. The best evidence of control the agreement or directive relating to Tongkos duties andresponsibilities was never introduced as part of the records of the case. The reality is, prior tode Dios letter, Manulife had practically left Tongko alone not only in doing the business ofselling insurance, but also in guiding the agents under his wing. As discussed below, the allegeddirectives covered by de Dios letter, heretofore quoted in full, were policy directions andtargeted results that the company wanted Tongko and the other sales groups to realign with intheir own selling activities. This is the reality that the parties presented evidence consistentlytells us.What, to Tongko, serve as evidence of labor law control are the codes of conduct that Manulifeimposes on its agents in the sale of insurance. The mere presentation of codes or of rules andregulations, however, is not per se indicative of labor law control as the law and jurisprudenceteach us.As already recited above, the Insurance Code imposes obligations on both the insurancecompany and its agents in the performance of their respective obligations under the Code,particularly on licenses and their renewals, on the representations to be made to potentialcustomers, the collection of premiums, on the delivery of insurance policies, on the matter ofcompensation, and on measures to ensure ethical business practice in the industry.The general law on agency, on the other hand, expressly allows the principal an element ofcontrol over the agent in a manner consistent with an agency relationship. In this sense, thesecontrol measures cannot be read as indicative of labor law control. Foremost among these are thedirectives that the principal may impose on the agent to achieve the assigned tasks, to the extentthat they do not involve the means and manner of undertaking these tasks. The law likewiseobligates the agent to render an account; in this sense, the principal may impose on the agentspecific instructions on how an account shall be made, particularly on the matter of expenses andreimbursements. To these extents, control can be imposed through rules and regulations withoutintruding into the labor law concept of control for purposes of employment.

From jurisprudence, an important lesson that the first Insular Life case teaches us is that acommitment to abide by the rules and regulations of an insurance company does not ipso factomake the insurance agent an employee. Neither do guidelines somehow restrictive of theinsurance agents conduct necessarily indicate "control" as this term is defined in jurisprudence.Guidelines indicative of labor law "control," as the first Insular Life case tells us, should notmerely relate to the mutually desirable result intended by the contractual relationship; they musthave the nature of dictating the means or methods to be employed in attaining the result, or offixing the methodology and of binding or restricting the party hired to the use of these means. Infact, results-wise, the principal can impose production quotas and can determine how manyagents, with specific territories, ought to be employed to achieve the companys objectives.These are management policy decisions that the labor law element of control cannot reach. Ourruling in these respects in the first Insular Life case was practically reiterated in Carungcong.Thus, as will be shown more fully below, Manulifes codes of conduct,30 all of which do notintrude into the insurance agents means and manner of conducting their sales and only controlthem as to the desired results and Insurance Code norms, cannot be used as basis for a findingthat the labor law concept of control existed between Manulife and Tongko.The dissent considers the imposition of administrative and managerial functions on Tongko asindicative of labor law control; thus, Tongko as manager, but not as insurance agent, becameManulifes employee. It drew this conclusion from what the other Manulife managers disclosedin their affidavits (i.e., their enumerated administrative and managerial functions) and aftercomparing these statements with the managers in Grepalife. The dissent compared the controlexercised by Manulife over its managers in the present case with the control the managers in theGrepalife case exercised over their employees by presenting the following matrix:31Duties of Manulifes ManagerDuties of Grepalifes Managers/Supervisors- to render or recommend prospective agents to be licensed, trained and contracted to sellManulife products and who will be part of my Unit- train understudies for the position of district manager- to coordinate activities of the agents under [the managers] Unit in [the agents] daily, weeklyand monthly selling activities, making sure that their respective sales targets are met;- to conduct periodic training sessions for [the] agents to further enhance their sales skill; and- to assist [the] agents with their sales activities by way of joint fieldwork, consultations and oneon-one evaluation and analysis of particular accounts- properly account, record and document the companys funds, spot-check and audit the work ofthe zone supervisors, x x x follow up the submission of weekly remittance reports of the debitagents and zone supervisors- direct and supervise the sales activities of the debit agents under him, x x x undertake anddischarge the functions of absentee debit agents, spot-check the record of debit agents, and insureproper documentation of sales and collections of debit agents.

Aside from these affidavits however, no other evidence exists regarding the effects of Tongkosadditional roles in Manulifes sales operations on the contractual relationship between them.To the dissent, Tongkos administrative functions as recruiter, trainer, or supervisor of other salesagents constituted a substantive alteration of Manulifes authority over Tongko and theperformance of his end of the relationship with Manulife. We could not deny though that Tongkoremained, first and foremost, an insurance agent, and that his additional role as Branch Managerdid not lessen his main and dominant role as insurance agent; this role continued to dominate therelations between Tongko and Manulife even after Tongko assumed his leadership role amongagents. This conclusion cannot be denied because it proceeds from the undisputed fact thatTongko and Manulife never altered their July 1, 1977 Agreement, a distinction the present casehas with the contractual changes made in the second Insular Life case. Tongkos results-basedcommissions, too, attest to the primacy he gave to his role as insurance sales agent.The dissent apparently did not also properly analyze and appreciate the great qualitativedifference that exists between:the Manulife managers role is to coordinate activities of the agents under the managers Unit inthe agents daily, weekly, and monthly selling activities, making sure that their respective salestargets are met.the District Managers duty in Grepalife is to properly account, record, and document thecompany's funds, spot-check and audit the work of the zone supervisors, conserve the company'sbusiness in the district through "reinstatements," follow up the submission of weekly remittancereports of the debit agents and zone supervisors, preserve company property in good condition,train understudies for the position of district managers, and maintain his quota of sales (thefailure of which is a ground for termination).the Zone Supervisors (also in Grepalife) has the duty to direct and supervise the sales activitiesof the debit agents under him, conserve company property through "reinstatements," undertakeand discharge the functions of absentee debit agents, spot-check the records of debit agents, andinsure proper documentation of sales and collections by the debit agents.These job contents are worlds apart in terms of "control." In Grepalife, the details of how to dothe job are specified and pre-determined; in the present case, the operative words are the "salestarget," the methodology being left undefined except to the extent of being "coordinative." To besure, a "coordinative" standard for a manager cannot be indicative of control; the standard onlyessentially describes what a Branch Manager is the person in the lead who orchestratesactivities within the group. To "coordinate," and thereby to lead and to orchestrate, is not somuch a matter of control by Manulife; it is simply a statement of a branch managers role inrelation with his agents from the point of view of Manulife whose business Tongkos sales groupcarries.A disturbing note, with respect to the presented affidavits and Tongkos alleged administrativefunctions, is the selective citation of the portions supportive of an employment relationship and

the consequent omission of portions leading to the contrary conclusion. For example, thefollowing portions of the affidavit of Regional Sales Manager John Chua, with counterparts inthe other affidavits, were not brought out in the Decision of November 7, 2008, while the otherportions suggesting labor law control were highlighted. Specifically, the following portions ofthe affidavits were not brought out:321.a. I have no fixed wages or salary since my services are compensated by way of commissionsbased on the computed premiums paid in full on the policies obtained thereat;1.b. I have no fixed working hours and employ my own method in soliticing insurance at a timeand place I see fit;1.c. I have my own assistant and messenger who handle my daily work load;1.d. I use my own facilities, tools, materials and supplies in carrying out my business of sellinginsurance;xxxx6. I have my own staff that handles the day to day operations of my office;7. My staff are my own employees and received salaries from me;xxxx9. My commission and incentives are all reported to the Bureau of Internal Revenue (BIR) asincome by a self-employed individual or professional with a ten (10) percent creditablewithholding tax. I also remit monthly for professionals.These statements, read with the above comparative analysis of the Manulife and the Grepalifecases, would have readily yielded the conclusion that no employer-employee relationship existedbetween Manulife and Tongko.Even de Dios letter is not determinative of control as it indicates the least amount of intrusioninto Tongkos exercise of his role as manager in guiding the sales agents. Strictly viewed, deDios directives are merely operational guidelines on how Tongko could align his operations withManulifes re-directed goal of being a "big league player." The method is to expand coveragethrough the use of more agents. This requirement for the recruitment of more agents is not ameans-and-method control as it relates, more than anything else, and is directly relevant, toManulifes objective of expanded business operations through the use of a bigger sales forcewhose members are all on a principal-agent relationship. An important point to note here is thatTongko was not supervising regular full-time employees of Manulife engaged in the running ofthe insurance business; Tongko was effectively guiding his corps of sales agents, who are boundto Manulife through the same Agreement that he had with Manulife, all the while sharing inthese agents commissions through his overrides. This is the lead agent concept mentioned abovefor want of a more appropriate term, since the title of Branch Manager used by the parties is

really a misnomer given that what is involved is not a specific regular branch of the company buta corps of non-employed agents, defined in terms of covered territory, through which thecompany sells insurance. Still another point to consider is that Tongko was not even settingpolicies in the way a regular company manager does; company aims and objectives were simplyrelayed to him with suggestions on how these objectives can be reached through the expansion ofa non-employee sales force.Interestingly, a large part of de Dios letter focused on income, which Manulife demonstrated, inTongkos case, to be unaffected by the new goal and direction the company had set. Income ininsurance agency, of course, is dependent on results, not on the means and manner of selling amatter for Tongko and his agents to determine and an area into which Manulife had not waded.Undeniably, de Dios letter contained a directive to secure a competent assistant at Tongkos ownexpense. While couched in terms of a directive, it cannot strictly be understood as an intrusioninto Tongkos method of operating and supervising the group of agents within his delineatedterritory. More than anything else, the "directive" was a signal to Tongko that his results wereunsatisfactory, and was a suggestion on how Tongkos perceived weakness in delivering resultscould be remedied. It was a solution, with an eye on results, for a consistently underperforminggroup; its obvious intent was to save Tongko from the result that he then failed to grasp that hecould lose even his own status as an agent, as he in fact eventually did.The present case must be distinguished from the second Insular Life case that showed thehallmarks of an employer-employee relationship in the management system established. Thesewere: exclusivity of service, control of assignments and removal of agents under the privaterespondents unit, and furnishing of company facilities and materials as well as capital describedas Unit Development Fund. All these are obviously absent in the present case. If there is acommonality in these cases, it is in the collection of premiums which is a basic authority that canbe delegated to agents under the Insurance Code.As previously discussed, what simply happened in Tongkos case was the grant of an expandedsales agency role that recognized him as leader amongst agents in an area that Manulife defined.Whether this consequently resulted in the establishment of an employment relationship can beanswered by concrete evidence that corresponds to the following questions:as lead agent, what were Tongkos specific functions and the terms of his additional engagement;was he paid additional compensation as a so-called Area Sales Manager, apart from thecommissions he received from the insurance sales he generated;what can be Manulifes basis to terminate his status as lead agent;can Manulife terminate his role as lead agent separately from his agency contract; andto what extent does Manulife control the means and methods of Tongkos role as lead agent?The answers to these questions may, to some extent, be deduced from the evidence at hand, aspartly discussed above. But strictly speaking, the questions cannot definitively and concretely be

answered through the evidence on record. The concrete evidence required to settle thesequestions is simply not there, since only the Agreement and the anecdotal affidavits have beenmarked and submitted as evidence.Given this anemic state of the evidence, particularly on the requisite confluence of the factorsdeterminative of the existence of employer-employee relationship, the Court cannot conclusivelyfind that the relationship exists in the present case, even if such relationship only refers toTongkos additional functions. While a rough deduction can be made, the answer will not befully supported by the substantial evidence needed.Under this legal situation, the only conclusion that can be made is that the absence of evidenceshowing Manulifes control over Tongkos contractual duties points to the absence of anyemployer-employee relationship between Tongko and Manulife. In the context of the establishedevidence, Tongko remained an agent all along; although his subsequent duties made him a leadagent with leadership role, he was nevertheless only an agent whose basic contract yields noevidence of means-and-manner control.This conclusion renders unnecessary any further discussion of the question of whether an agentmay simultaneously assume conflicting dual personalities. But to set the record straight, theconcept of a single person having the dual role of agent and employee while doing the same taskis a novel one in our jurisprudence, which must be viewed with caution especially when it isdevoid of any jurisprudential support or precedent. The quoted portions in Justice CarpioMorales dissent,33 borrowed from both the Grepalife and the second Insular Life cases, tosupport the duality approach of the Decision of November 7, 2008, are regrettably far removedfrom their context i.e., the cases factual situations, the issues they decided and the totality ofthe rulings in these cases and cannot yield the conclusions that the dissenting opinions drew.The Grepalife case dealt with the sole issue of whether the Ruiz brothers appointment as zonesupervisor and district manager made them employees of Grepalife. Indeed, because of thepresence of the element of control in their contract of engagements, they were consideredGrepalifes employees. This did not mean, however, that they were simultaneously consideredagents as well as employees of Grepalife; the Courts ruling never implied that this situationexisted insofar as the Ruiz brothers were concerned. The Courts statement the Insurance Codemay govern the licensing requirements and other particular duties of insurance agents, but it doesnot bar the application of the Labor Code with regard to labor standards and labor relations simply means that when an insurance company has exercised control over its agents so as tomake them their employees, the relationship between the parties, which was otherwise one foragency governed by the Civil Code and the Insurance Code, will now be governed by the LaborCode. The reason for this is simple the contract of agency has been transformed into anemployer-employee relationship.The second Insular Life case, on the other hand, involved the issue of whether the labor bodieshave jurisdiction over an illegal termination dispute involving parties who had two contracts first, an original contract (agency contract), which was undoubtedly one for agency, and anothersubsequent contract that in turn designated the agent acting unit manager (a managementcontract). Both the Insular Life and the labor arbiter were one in the position that both were

agency contracts. The Court disagreed with this conclusion and held that insofar as themanagement contract is concerned, the labor arbiter has jurisdiction. It is in this light that weremanded the case to the labor arbiter for further proceedings. We never said in this case thoughthat the insurance agent had effectively assumed dual personalities for the simple reason that theagency contract has been effectively superseded by the management contract. The managementcontract provided that if the appointment was terminated for any reason other than for cause, theacting unit manager would be reverted to agent status and assigned to any unit.The dissent pointed out, as an argument to support its employment relationship conclusion, thatany doubt in the existence of an employer-employee relationship should be resolved in favor ofthe existence of the relationship.34 This observation, apparently drawn from Article 4 of theLabor Code, is misplaced, as Article 4 applies only when a doubt exists in the "implementationand application" of the Labor Code and its implementing rules; it does not apply where no doubtexists as in a situation where the claimant clearly failed to substantiate his claim of employmentrelationship by the quantum of evidence the Labor Code requires.On the dissents last point regarding the lack of jurisprudential value of our November 7, 2008Decision, suffice it to state that, as discussed above, the Decision was not supported by theevidence adduced and was not in accordance with controlling jurisprudence. It should, therefore,be reconsidered and abandoned, but not in the manner the dissent suggests as the dissentingopinions are as factually and as legally erroneous as the Decision under reconsideration.In light of these conclusions, the sufficiency of Tongkos failure to comply with the guidelines ofde Dios letter, as a ground for termination of Tongkos agency, is a matter that the labor tribunalscannot rule upon in the absence of an employer-employee relationship. Jurisdiction over thematter belongs to the courts applying the laws of insurance, agency and contracts.WHEREFORE, considering the foregoing discussion, we REVERSE our Decision of November7, 2008, GRANT Manulifes motion for reconsideration and, accordingly, DISMISS Tongkospetition. No costs.SO ORDERED.